tv Lunch Money Bloomberg March 24, 2014 7:00pm-8:01pm EDT
>> welcome to "lunch money," we tie together the best stories, interviews, and business news. i am matt miller in for adam johnson. googler in chief, larry page is tremendously upset and super excited all at the same time. in sports, if you build it, who will pay? the stadium business comes to spring training. the two sides of a herbalife story. carl icahn gets more seats, bill ackman about to break even.
vice grip, the man who is building a $1 billion empire out of vice media. in pop, a fender bender to find out how the classic guitars are made by hand right here in america. let's kick it off with what everyone is talking about today. the search for malaysian air flight 370. it has been just over two weeks since the plane disappeared after taking off from kuala lumpur. multiple countries have searched the waters of the southeast by boat, plane, and by satellite. investigators have analyzed mountains of data. at most, there has been only speculation as to what happened. today, we heard from the malaysian prime minister on the latest analysis of data from a british satellite provider. here it is, in the raw. >> based on the new analysis, we
have concluded that mh370 flew along the southern corridor and that its last position was in the middle of the indian ocean, west of perth. this is a remote location. far from any possible landing place. it is therefore with deep sadness and regret that i must inform you that according to this new data, flight mh370 ended in the southern indian
ocean. >> malaysian prime minister speaking earlier today on the search for the missing passenger jet. while he gave no concrete answers, he declared the search will be limited to the southern indian ocean, some debris was spotted by chinese and australian search crews. the objects could be received by tomorrow morning at the earliest. the prime minister will hold another news conference tomorrow. the other story is the ongoing chess match between russia and ukraine. today, president obama and the netherlands with leaders from europe, china, japan and other countries. he spoke earlier at a news conference with his dutch counterpart. >> europe and america are united in our support of the ukrainian government and the ukrainian people. we are united in imposing a cost on russia for its actions so
far. prime minister rutte pointed out that the sanctions would bring consequences to the russian economy. we will continue to coordinate with the netherlands and our european partners as we go forward. >> the big question now is russia's continued aggression in crimea. russian military forces stormed multiple ukrainian military bases today in crimea. >> we are very much concerned about the deployment of russian troops on our eastern border. the ukrainian government is trying to use all their peaceful means and diplomatic means to
stop russia. but people are also ready to defend their homeland. >> that is what lawmakers are worried about as well. >> they need everything from fuel to tires to sleeping bags. this army in ukraine was devastated by yanukovych. let's help the ukrainian army get on its feet as a self-defense force. >> even with all this discussion about what is going on in russia and crimea and ukraine, the markets have not been hurt at all. the question is why? >> in ukraine, i would think this would be negative for risk assets. one reason is because it looks like russia really has the leverage.
we are not going to put boots on the ground in ukraine, they are not a member of nato. it gets more serious if russia moves into a confrontation with nato, then it is an enormous impact. >> ukraine will dominate talks at the group of seven industrialized nations meeting today in the hague. the u.s., canada, france, germany, italy, japan, and britain. at the beginning of the month, the group of eight were planning their meeting in sochi. preps for that meeting have been suspended and the number has been trimmed by one. german chancellor angela merkel says that russia is still a member of the larger group. what makes google cofounder and ceo very excited about the future? believe it or not, it involves balloons. we will hear from him next. are sports stadiums worth the millions and hundreds of millions, even billions of dollars dished out to pay with them?
we head to fort myers, florida, where the red sox are finishing their spring training, coming up in sports. teen warriors topped the muppets at the box office. "divergent" took in $56 million in ticket sales, the latest feature from lions gate targeting a young audience. "the muppets: most wanted" rang up $16 million in second place. ♪
google's cofounder and ceo weighed in, sitting down with charlie rose for a rare interview in vancouver. >> it is disappointing that the government secretly did all this stuff and do not tell us. i do not think we can have a democracy if we are trying to protect ourselves from the government for stuff we never had a conversation about. i don't mean we have to know about a terrorist attack they are worrying about protecting us from, but we have to know what kind of surveillance the government is going to do and how and why. we have not had that conversation. the government has done a tremendous disservice to itself by doing all that in. >> never coming to google to ask for anything. >> not google, but the public.
we need to have a debate about that. where we cannot have a functioning democracy. it is not possible. i am sad that google is in the position of protecting our users from the government doing secure things that nobody knows about. >> and then there is a privacy side of it. >> the privacy side -- the world is changing. carry your phone and it knows where you are. so much more information about you. that is an important thing and it makes sense why people are asking difficult questions. we spent a lot of time thinking about this and what the issues are. i am a little bit -- i think the main thing we need to do is provide people a choice. show them what data has been collected. the search history, location data, we are excited about
incognito mode in chrome. giving people more choice and more awareness of what is going on. >> all right. something else larry page is passionate about is artificial intelligence. it used to be the stuff of science fiction, but the 40-year-old billionaire wants to make it more of a reality. >> this is one of the most exciting things i have seen in a long time. the guys who started this company, he has a neuroscience and computer science background. he went back to school to get his phd and study the brain. we are seeing a lot of exciting work going on that crosses computer science and neuroscience in terms of really understanding what it takes to make something smart. and do really interesting things. >> where is the level of it now and how fast do you think we are moving? >> this is kind of the state-of-the-art right now.
understanding cats on youtube, proving voice-recognition. we use a lot of machine learning to improve things incrementally. those examples are really exciting. it is one program that can do a lot of different things. >> we have got the image of a cat. this is how machines look to cats. there it is. can you see the cat designed and seen by machines? >> this is learned from watching youtube. there is no training or notion of a cat, the concept of a cat is something you would understand and now that the machines can understand. >> weird. one google project that has taken off, literally, the balloon project. the mission is to bring internet connectivity to everyone. >> focusing on access and talking about the future.
we recently released the balloon project. it sounds totally crazy. i can show the video here. it actually, two out of three people in the world do not have good internet. we think this can really help people. >> it's a balloon. >> you get access to the internet. >> why does it give you access to the internet? you had to figure out how to make balloons possible. they did not have to be tethered. >> this is a good example of innovation. we have been thinking about this idea for five years before we started working on it. it is really how do we get access point up high, cheaply. normally you have to use satellites and it takes a long time to watch them. you saw how easy it is to launch a balloon and get it up. using the power of the internet, i did a search and found that 30
years or 40 years ago, someone had put a balloon up and it went around the earth multiple times. i thought why can't we do that today? that is kind of how this -- >> are you at the mercy of the wind? >> as it turns out, we did weather simulations. if you control the altitude of the balloons, which you can do by pumping air into them, you can control roughly where they go. i think we can build a worldwide mesh that can cover the whole planet. >> that is freaking cool. watch the full interview with larry page tonight, 8:00 and 10:00 p.m. eastern. only right here on bloomberg. still ahead on "lunch money," a conversation with the brain behind vice media. how the news outlet won the backing of rupert murdoch. the pros and cons of building sports stadiums. we hear both sides of the argument, coming up in sports. ♪
>> in sports -- the stadium debate. if you build it, will they come? stadiums can cost taxpayers millions of dollars or billions of dollars, like the jetblue park in florida, where the red sox have their spring training. some argue it is worth the business and it attracts. phil from the university of south florida says it is not. he spoke with mike mckee. >> we have never found that spring training has to do with the amount of spending that goes on in any location.
we see teams moving around and you can look at a county and see whether or not the team comes to the county, do their sales go up. the team leaves the county, do their sales go down? we have never found real evidence. even if the claims of all these people are true, the amount of tax revenue generated by the spending that the state claims is not enough to cover the operation and maintenance costs of a stadium. >> do we go from here to additional sports palaces? are the american taxpayers starting to get to the limit of what they will pay for these things. >> i noticed an interesting trend in miami and dade county, they build a new stadium for the baseball team, not necessarily the most favorite team. they built the marlins a baseball stadium. the marlins immediately cut their spending on players to the bone. the team was abysmal this year. the stadium has mired the city and debt.
they turned around and asked for funds to improve dolphins stadium and the taxpayers and legislatures said no. maybe the trend is changing. >> mike spoke with the lee county organization that gave the red sox the subsidy for the $72 millionstadium, he says it was an investment and for his own. unlike major league baseball facilities in hometowns, this is a tour as a venue. it draws hundreds of thousand people from boston. we also manage and operate the minnesota twins facility and it draws many people from the upper midwest. when spring training is over, our office uses the facilities to program 200 days of amateur sports events. >> the tax paid for the construction, you have got to pay for the operation. do you make a profit? >> no, we do not.
we spend about $1.5 million per facility on maintaining the facilities. at the same time, that $1.5 million is generating around $50 million of economic impact for our community through these amateur sports events of the rest of the year. >> when this is all paid for, you will have on this paid half a billion dollars for this, couldn't you have done something else for the community with that kind of money? >> it was built with bed tax dollars, which are restricted by state statute to only certain things you can do. there are people who think that maybe we could have used the dollars to two additional beach and shoreline nourishment projects or we could have spent more marketing on tour is him, international tour efforts. it was a policy decision and we have been in the business of spring training since the early 1900s.
our elected officials at the time thought that using 20% of our bed tax to host spring training was important. >> the minnesota twins also play in fort myers. the president of the team says it is good for lee county and for the fans. >> there is a significant roi for lee county when you consider that 60% of our fans, game in and game out, are coming from well outside of the county. they are spending money on hotel rooms, restaurants, and at local attractions. it is a significant driver of economic development. it is a win-win. >> the red sox got their new stadium a couple years ago. you can get upgrades here. did the twins ever putting money into it as well? your own equity? >> we are putting money into it. we have about $8 million that will be invested by the team, not to mention that we will be
putting dollars and every single year in terms of people buying homes, players training here year-round. there is an economic benefit to the county beyond spring training. >> what do you get for the money and the stadium? >> there is dollars in player development, the training facility and conditioning elements. the dollars are going into fan amenities. fans' expectations have changed. they want a wider concourse and better concessions. they want the opportunity to have technology and wi-fi, things of that nature. a lot of dollars are going into enhancing the experience for baseball fans. it gives us an advantage, we are doubling down and investing on that. we are building a player development academy as part of this. we think that will be a game changer as players involved. we do believe that spring
training, and specifically a partnership with the community in southwest florida, is a difference maker for the twins. >> the new york yankees stadium in the bronx is the most expensive major league. it cost $1.5 billion, taxpayers put in half of that. the franchise does not pay sales or property taxes in the bronx. another all-american pastime, rock 'n roll. you cannot have rock 'n roll without guitars. we will show you how the fender is made. [guitar music plays] ♪
>> this is "lunch money," on bloomberg television. streaming live on bloomberg.com, also on your tablet and cell phone. i am matt miller. today's moving picture, the video is the story. a mudslide in washington has killed eight people and a dozen more are missing. it occurred in a rural area north of seattle. it destroyed at least 30 homes and started when a large chunk of rainsoaked hillside split away. the millard is 15 feet deep and has slowed rescue efforts.
a busy shipping channel in houston remains closed after a weekend accident, nearly 170 thousand gallons of oil spilled after a barge collided with another vessel. the channel connects galveston bay and the gulf of mexico and handles as many as 80 ships a day. no timetable for when it will reopen. in chicago, a subway train jumped the tracks and ran up an escalator at o'hare airport. the early morning accident injured 30 people. the train was traveling faster than normal when it entered the station, crossed the platform, and scaled an escalator. authorities are questioning the operator and reviewing footage to try to determine the cause of the accident. no fatalities reported. in activists, carl icahn is at it again. >> we need to bring you up to speed in the battle over
herbalife, the nutritional supplement maker has agreed to give carl icahn three more representatives on its board. putting icahn a step closer to gaining control over this company and raising the stakes one more time in the standoff with bill ackman. >> erik calls it "herbalife," because he is canadian. bill ackman is close to breaking even on his bet against hls. ackman bet against herbalife in may 2012. you can see the drop, as dan loeb and carl icahn came to herbalife's rescue, the stock battle back. the federal government opened an investigation into herbalife and the stock has fallen. the news from carl icahn has sent the stock back up.
the war over herbal life goes on. dwayne stanford explained it to "market makers." >> these board members all come from icahn enterprises. two are executives with the company and the other is a director for icahn enterprises. he is beefing up his visions from 2 to 5 on the herbalife board. this comes as bill ackman has been able to get this investigation he has called for, the ftc now looking at the company. the stakes have been raised and we are going to be in for quite a battle. >> you were reporting that after a year of losses on the short bet against herbalife. bill ackman might be near break even, no longer losing money. >> that is right. based on our calculations, he is somewhere near breakeven. a lot of that coming in the last
week as the ftc says they are asking for more questions of the company. it creates uncertainty among investors. you have seen a considerable amount of scrambling as people tried to figure out what is going to happen at the end of this investigation. you could have some sort of finding along the lines of what bill ackman has asked for in terms of it being an illegal pyramid scheme, or it could be a slap on the wrist. perhaps they come back and there is no action at all. that is what people are waiting for. >> how certain can we be about ackman's financial position? he put about $1 billion on a short position against herbalife to start off with in 2012. hard to believe with so much time has transpired. then he restructured his trade to limit his downside, presumably that cost him something.
at what point, if ever, will we be able to know where bill ackman stands? >> the picture is more cloudy from when it was a simple short bet, the options make it very difficult. we have done some analysis looking at some of the average prices in the period he was buying the stock. he started buying may 1 of 2012. this was while david einhorn had asked questions on the conference call that sent the stock down. he started buying then and it was december of that same year that bill ackman decided to act as his own catalyst, as he said, to bring his allegations to light. as he has shorted the company to about $1 billion. later, as the stock increased, he did add some options.
our best guess right now is that he is very close to breakeven. >> by the way, erik drinks herbal tea. the man behind vice, how it went from punk culture media outlet to major media player. how you can own a piece of rock 'n roll history. a collection of guitars, including eric clapton's gibson, are going on the block. no luck for jimmy kimmel, he tried to get an answer from hillary clinton on whether she is running for president in 2016. she would not say yes or no, but we all know the answer. >> will chelsea get her old room back or will you convert that into a home gym? [laughter] >> you are throwing me under the bus. what is this? >> this is what my parents did to my bedroom, i am staying with
>> a big story in media. apple in talks with comcast about teaming up on an internet-based television service that would get special treatment to bypass online congestion. that is according to the wall street journal. as bloomberg reported months ago, apple had been in talks with time warner cable on creating a streaming products before its merger with comcast. brendan greeley and jeff hayzlett talks about what it means for the industry on "surveillance." >> it did not have to cut any deals with comcast or time warner. once netflix is big enough that it can cut deals and pay for this, i do not know how the next netflix is going to happen. they have a huge barrier to entry.
>> this is a barrier to entry to pick up on this. >> this is a trojan horse, it is a smart move on apple's part. they are trying to move their ecosystem. when you are watching television, when you have these over-the-top televisions where shows we might develop digitally, they are online. i will have to go through through itunes or the app world, go through apple to deliver it. >> all right. fusetv from msg getting more popular by the week, a new player making an offer to buy the channel for $350 million in cash, surpassing bids from j. lo and p. diddy. the company says they have not lined up financing yet, but they have met with blackstone, and disney.
another company giving traditional tv a run for its money is vice media. jon erlichman sat down with its fearless leader asking him if a cable network is in the cards for vice. >> i would have said no up until recently, but we have been selling so much tv around the world. whenever we look at something, we were doing so many events in london that we bought a pub and we put all our events in the pub and that came our most successful venture. we are creating so much ip now that it is always smart to on your own platform if you can't. we are looking at various opportunities. there is such a destructive it in a media right now. we are throwing a lot of cash and we can look at buying distressed media assets and seeing if we cannot turn them around. >> you are a profitable company.
what does that mean? does that mean you are a wildly profitable company? >> for what we do, we are wildly profitable. we have been profitable since day one because we came up in a recession. we believe you have to make profit or you do not exist. we have been doubling our top line pretty much every year we have been in existence. that gets harder because there is a lot more zeros in that now. our margins have gone up. as we are now licensing to mobile, online, and tv and film, our margins are going up. we are running at around 34% margins and trying to get about 40% or 44% next year. the holy grail of 50% for an online company would be huge. >> catch the interview with shane smith on "bloomberg west" at 1:00 p.m., 6:00 p.m., at 11:00 p.m. eastern.
those times are different in the west. here is something shane smith can buy with all his money. a piece of rock 'n roll history. some of the rarest guitars, vintage guitars going up for auction. we are not stopping there. we take you inside the california factory where the legendary stratocaster is made. all that is coming up. ♪
>> ever wanted to own a piece of rock 'n roll history? here's your chance. starting april 2, more than 250 vintage guitars are being auctioned off in new york city. the auction house's president stopped by "in the loop" to preview some of the items. >> to people with a finely tuned ear, every guitar that is
handmade, these are not electric, mass-produced instruments, but handmade instruments, they have different sounds. some are higher and they are very discernible to the aficionado. they are gems. >> what makes an aficionado of guitars? are these people that play them? >> people who play them, who are passionate about them. we have sold the guitars of jerry garcia for about $1 million apiece to people who grew up with jerry and thought of him as almost a godlike figure. to have something he treasured was enormous. >> you mentioned that they went for million dollars each. there is nostalgia and a personal connection for the people bidding. what might this collection go for? what are you anticipating? >> there are instruments in this collection, the finest
collection ever to come to auction, a range from $7000 to a high of what we expect to be a seven-figure amount. >> jerry garcia is an actual god. electric guitar maker fender has been in business since 1946. we take a look at where rock 'n roll staple, the stratocaster, where those are made. [guitar music] >> i started playing guitar when i was 12 or 13. fender is the world's largest producer of guitars and amplifiers. from the 1950's and the birth of rock 'n roll to today, artists like john mayer, jimi hendrix, they have all held the fender. >> everything is so classic about it. everybody's first guitar
triggers all these memories. it is a fender guitar. >> this building produces the quintessential fender products. guitars are interesting, there are not a lot of industries where globally, an american made product, is the most premier and prestigious, aspirational product. fender guitars are. >> people will save for years to be able to afford a usa made fender guitar. there is no question that sometimes running a business in california is challenging. there is a lot of regulatory issues. but you know what, we have so much pride in our heritage and in our roots here. we have always been a southern california company and we are not going anywhere soon. the two main components of the
guitar are the body and the neck. each of those start off as raw pieces of wood. they go through a process. this is a spread of ash from the southeastern u.s. these are the samples that we used to make sure that we have the shape of a neck exactly right. you might have heard of him before, if it is a thousandth of an inch off, they can tell. >> it gives me chills to see the machines that have been used for years. >> it goes through paint, a curing process. this is where it all comes together. now we start dressing the frets, putting the electronics in. then it goes over and is packaged to go out to the next
to show you what is happening on the treasury markets. bonds pulled off a little bit with yields coming up one basis point. the 2-year note to strengthening a little bit. big story of the day is what is happening to the yield curve. thinnest its the has been since 2009. i am joined by the security directors of fixed income. what he think the yield curve is so off today? thes mostly about flattening of the curb where the market is still trying to re-price what the fed has said. many investors are still grappling with what it really means because there was a lot delivered. the policy statements -- the investments you are seeing, to -- continuation of where the
rate should be relative to where fed funds will be. what was your reaction personally to the janet yellen testimony? it seem like she made a little stumble clarifying that it could be six months. do you think markets have appropriately repriced raced on what you heard? >> by putting out a day like that, they want the most flexibility. i don't think the market is convinced that is april or june? it is a second-half 2015 event. i don't agree it is a second-quarter type of event despite the fact she said six months. nothing really changed from the data we're seeing. >> the actual projection for the fed funds rate indicated that policymakers do see rates rising for the best. >> it is looking at one percent rate on fed funds by the end of
2015. they became more hawkish in general and that was another component. that is still only modestly more so with a one percent at the end of 2015, not necessarily the beginning. to seestors turn to try what other policy makers are saying and there are many fed offense going on. which ones are you going to be watching closely? >> the hawks. they're in the minority that they have a loud voice. it we interesting to see what their interpretation is. i will look at all of them but in general, i'll be focusing on the hawks to get a better sentiment on what they are thinking. that doesn't necessarily change what i think is going to happen but it does shape the market psychology. today, the two year was three basis points higher. it did come back a little bit.
>> finally, your thoughts on china. we did get another disappointing economic plan. what is your take? on x it is slowing -- >> speculation is growing that the government would have to do some things in -- something to stabilize that growth. it is a soft target. we are getting to the point where they do not do something else, it could be a number of different things, we might undershoot that. us.hank you for joining that does it for on the markets. ♪ .